Food and drink manufacturers have remained resilient despite mixed expectations for UK economic growth, reports the Food and Drink Federation (FDF).
The FDF Q1 2018 Business Confidence Survey found that more than half of manufacturers polled believe that general business conditions have remained the same as Q4 2017.
More than 25% of participants said that conditions had deteriorated, while fewer than one in five have seen business conditions improve.
But food and drink manufacturers were split over their expectations for UK economic growth this year. Around two-thirds expect a rise in input prices, with heightened ingredient costs ranked the top barrier to food and drink manufacturing success throughout the rest of the year.
The FDF said these findings were in line with reported figures that show almost half of food and drink businesses have experienced increased packaging costs for during the first three months of 2018.
Increased demand for healthier food products were identified as a key opportunity for food manufacturers during the rest of the year.
Almost half of businesses reported an increase in volume sales in the UK in Q1 and they anticipate increased domestic demand for produce and planned investment in new product launches.
Ian Wright, FDF chief executive, described the stable business conditions for the food and drink industry as “encouraging”.
“It is not surprising that the industry is fearful over the uncertainty that surrounds a post-Brexit UK-EU relationship, and the results rightly reflect this as a barrier for business in the coming year,” he said.
“Despite the woes of Brexit, it is great to see that food and drink businesses have found hope in the ever expanding demand for healthier food products.”
When looking at the key impacts on food and drink businesses in Q1 2018, members found that the key impacts were:
- 77% increased packaging costs
- 72% increased ingredient costs
- 52% increased energy costs
- 65% increased average wages in their business
- 60% decreased product margins
- 49% increased volume sales to the UK
- 56% productivity gains